Arista Networks, Expanding Market Share from Data Centers to AI Networking

■ Recommended Stock Trading Strategy

• Stock Name: Arista Networks (ANET)
• Recommendation Price: $350–$356
• Target Price: $455
• Stop Loss Price: $300

■ Investment Points

• Leading Company in the Cloud Data Center Networking Market: 2Q revenue was $1.69 billion (+16% YoY), operating income was $700 million (+32%), net income was $660 million (+35%), and Non-GAAP EPS was $2.10 (+33%). Both revenue and EPS exceeded consensus estimates.
• Stable Customer Base with Major Cloud Companies: Meta and Microsoft account for 21% and 18% of annual revenue, respectively. Revenue from Cloud Titan customers, including these, makes up 43% of total revenue. Customers with spending of $1 million or more increased to 35% in 2023. Notably, collaboration with NVIDIA is expected to strengthen AI networking solutions and rapidly expand market share.
• Positive 3Q Guidance Based on Robust Data Center Demand: Expected revenue of $1.72 billion–$1.75 billion, with a Non-GAAP operating margin of 44%.
• Continued Growth Expected through AI Networking: Annual revenue is expected to grow by at least 14% this year, with a minimum of $750 million in revenue anticipated from the AI networking segment by 2025.
• Shareholder Return Policy: $170 million in share buybacks during 2Q, with ongoing proactive buyback activities expected to enhance shareholder value.

■ Expected Earnings

• 2024: Revenue $6.8 billion (+16%), EPS $7.82 (+19%)
• 2025: Revenue $8.0 billion (+17%), EPS $8.69 (+11%)
• 2026: Revenue $9.4 billion (+18%), EPS $10.58 (+22%)

■ AI Stock Analysis
Overall score of 90, ranking 5th out of all listed companies in the U.S., in the top 0.09% as a top-tier stock

• Future Growth: 60
• Monopoly Power: 100
• Financial Stability: 100
• Profitability: 100
• Cash Liquidity: 90

■ Company Overview

• An internet technology company providing data center and cloud services
• Market Capitalization: $111 billion, PER: 45.1x, PBR: 13.2x, ROE: 32.8%
• Revenue by Product: Cloud Networking Products (86%), Cloud Networking Services (14%)
• Revenue by Region: Americas (79%), Europe, Middle East, and Africa (11%), Asia Pacific (9%)

■ Chart Analysis

• Recent 6-month Stock Price Performance: +24.88%

Recent Stock Price Trend

■ Stock News

• 2024-04-30 Launched Next-Gen Multi-Domain Segmentation for Zero Trust Networking
• 2024-05-29 Partnered with NVIDIA to Provide Comprehensive AI Solutions
• 2024-06-05 Unveiled Etherlink AI Networking Platform

■ Dividend

• No dividend payments in the past 10 years